BUSINESS LAWS
FORMATION 1 EXAMINATION - APRIL 2009
NOTES:
You are required to answer 5 Questions. (If you provide answers to more than five questions, you must draw a
clearly distinguishable line through the answer(s) not to be marked. Otherwise, only the first five answers to
hand will be marked).
TIME ALLOWED:
3 hours, plus 10 minutes to read the paper.
INSTRUCTIONS:
During the reading time you may write notes on the examination paper but you may not commence
writing in your answer book.
Marks for each question are shown. The pass mark required is 50% in total over the whole paper.
Start your answer to each question on a new page.
You are reminded that candidates are expected to pay particular attention to their communication skills
and care must be taken regarding the format and literacy of the solutions. The marking system will take
into account the content of the candidates' answers and the extent to which answers are supported with
relevant legislation, case law or examples where appropriate.
List on the cover of each answer booklet, in the space provided, the number of each question(s)
attempted.
The Institute of Certified Public Accountants in Ireland, 17 Harcourt Street, Dublin 2.
BUSINESS LAWS
THE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS IN IRELAND
FORMATION I EXAMINATION – APRIL 2009
Time Allowed: 3 hours, plus 10 minutes to read the paper.
Number of Questions to be answered: FIVE
(Only the first five questions answered will be marked).
All questions carry equal marks.
1.
2.
3.
4.
5.
6.
Discuss in detail the sources of law in the Irish legal system.
[Total: 20 marks]
Discuss the distinction between legal and equitable interests in the law of real property, emphasising its
importance with regard to unregistered land.
[Total: 20 marks]
What is the law on guarantees and after-sale services in Ireland under the Sale of Goods and Supply of
Services Acts?
[Total: 20 marks]
Describe in detail all the following negotiable instruments:
a)
b)
c)
Cheques.
Bills of Exchange.
Bank Drafts.
[Total: 20 marks]
•
•
•
Registration of a company;
Articles of Association;
Memorandum of Association.
[Total: 20 marks]
Discuss company law in regard to the following:
Stella decides she needs an entire new set of contract law books. She goes to Blanche’s bookshop where
she has noticed a number of good contract books in the shop window all priced €20, and one in particular,
“All about Contract ”, which she really wants to get. Stella goes into the shop and looks for the books inside.
When she finds them she realises that they are all marked €40. “All about Contract ” is not there at all.
Stella goes to Blanche at the till with one of the books from inside the shop and Blanche asks for €40.
Stella says she will only pay €20 as that is what they are marked as outside. She also asks if she can have
“All about Contract ” from the shop window. Blanche tells her that she is saving that copy for a law lecturer
and she cannot have it.
7.
[Total: 20 marks]
Advise Stella.
What is the nature in Irish Insurance Law of:
a)
b)
Insurable interest and; an
Insurance intermediary/broker.
[Total: 20 marks]
END OF PAPER
Page 1
SUGGESTED SOLUTIONS
BUSINESS LAWS
THE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS IN IRELAND
Solution 1
FORMATION I EXAMINATION – APRIL 2009
Discuss in detail the sources of law in the Irish legal system.
[Total: 20 marks]
General Comments
The aim of this question is to examine the students’ knowledge of sources of law in Ireland as well as the
detail in which the students understand these sources and the hierarchy within them. The students are
expected to be descriptive in their answer. The question is relatively straightforward and in-depth analysis
is not required. Students should explain the various sources, domestic and international, in Irish law.
Solution
The Irish Constitution, or Bunreacht na hÉireann, case law, statutes/legislation, EU and international law
are the sources of law in the Irish jurisdiction. They are also the sources which lawyers and other
professionals use in order to discover what the solution is to a particular issue. Lawyers must also be
familiar with the principles of the rule of law and the hierarchical system in which these sources are
classified. This ensures that lawyers will be able to ascertain which rule prevails when there is a conflict
between two sources.
Bunreacht na hÉireann 1937
The Irish Constitution is the core source of law in this jurisdiction. Within the Constitution itself the other
sources of law are enumerated and their hierarchy clearly set out. The Constitution also catalogues the
bodies which can enforce and interpret both the Constitution itself and all the other sources of law. As the
primary source of law as well as having a higher status within the jurisdiction, all other laws must be in
conformity with it. Any law that does not comply with the Constitution will be invalid. The Constitution
regulates the relationship between the organs of government and the citizens and those living in Ireland.
The Constitution also guarantees certain fundamental rights and freedoms such as equality before the law,
personal liberty, property rights, and freedom of religion and the importance of the family. The Constitution
is in both official languages but in the case of incompatibility it is the Irish version which will prevail.
[4 marks]
Statutes and legislation
The Irish Constitution under Article 15.2 assigns to the Oireachtas the sole law making power within the
State. Each year a large number of statutes or new laws are brought into operation as Acts of the
Oireachtas. The system for the creation of Acts is set out in the Constitution. Acts of the Oireachtas are
known as primary legalisation and must follow a particular procedure to be legitimate including going
through both houses of the Oireachtas, the Dáil and the Séanad. Each statute must be compatible with
the Irish Constitution and Supreme Court may strike down legislation if it is found to not be in compliance.
Statutes are divided in to sections and parts, depending on their length. Article 25 of the Irish Constitution
states that all acts must be in both official languages, Irish and English and in the case of contradiction it
is the Irish version which will prevail. Each act or statute must be compatible with the Constitution, and
may be referred to the Supreme Court by the President to decide whether the Bill is compatible
Regulatory orders or statutory instruments are known as secondary legislation. Unlike primary legislation,
these are introduced by Government ministers. The Statutory Instruments Act 1947 defines these as an
“order, regulation, rule scheme or bye-law, made in the exercise of a statutory power.” The may for
instance give effect to primary legislation which has already been passed and it is also how European
directives become part of Irish law. This is not an unfettered power for government ministers. To ensure
that they remain within the remit of the law, statutory instruments are “laid before” one or both Houses of
the Oireachtas, and after a certain time if no objections are raised it becomes law.
[4 marks]
Page 3
Common Law
The Common law consists of decisions delivered by the courts over many centuries and through the
doctrine of precedent these decisions have binding force. The principle of stare decisis allows lawyers to
decipher the law from the vast amount of cases that have been decided. Under the doctrine of stare decisis
decisions of earlier cases in superior courts will be followed by lower courts. This creates a hierarchy
among the courts and also limits the amount of discretion open to judges and aids in the development of
a consistent body of law. The doctrine of binding precedent is based on the notion that a decision made by
a court in a case involving a particular set of conditions is binding on other courts in the same jurisdiction
in later cases, where the facts are materially the same. Clearly no two set of circumstances are the same
and sometimes different decisions are made when the facts are quite similar. In these situations the court
can distinguish a case as having a different set of facts and therefore not applicable to the decision before
it.
The common law or the use of previous cases to decide the case before the court dates back to the
Norman invasion of England in 1066. This was spread to Ireland in 1167 following the Norman invasion in
Ireland. The coherent system we recognise today was introduced in the 19th Century. An increasingly rigid
system of binding precedents was introduced after a system of hierarchy was introduced into the court
system under the Supreme Court of Judicature (Ireland) Act 1877. Precedents fall generally into two
categories; they may be binding or persuasive. Generally, decisions of higher courts are mandatory
precedent on lower courts within that system. Within the Irish system this means that the decisions of the
Supreme Court are binding on all lower courts, but decisions of the High Court are not binding on the
Supreme Court. A decision of an earlier court at the same level, for example the High Court, is binding on
the High Court in later decisions unless the court has good reason not to follow it.
[4 marks]
European Law
Ireland became a member of the European Union as it is now known in 1973. Since that time the law of
the European Union has had direct application in major parts of Irish law. This required a change in the
Irish Constitution to incorporate the Treaty of Accession. Article 29 of Bunreacht na hÉireann incorporates
the various European Treaties into Irish law. This created a new source of law in Ireland. Article 29.4.3
facilitated European Union laws that sought to enable the internal market to function by ensuring the free
of movement of goods, persons, services and capital had primary legislative force in Ireland. European
Union Law takes precedence in Ireland over domestic law. However this only occurs in areas that the EU
has competence. Importantly this applies even when it is incompatible with Irish constitutional provisions.
The EU Treaty and EU legislation, other than directives, have direct application in Ireland. This means that
Irish and EU citizens can rely on Community law in their own and each other’s national legal systems. The
European Community has its own sources of law. These are the Treaties, followed by secondary legislation
(regulations, directives and decisions, recommendations and opinions), and case law.
[4 marks]
International Law
International law comes under Article 29 of the Irish Constitution. Article 29.6 establishes that no
international agreement may form part of the domestic law of the State, unless the Oireachtas has made
it part of Irish law. This excludes European Union Law. Though Article 29.3 states that Ireland does accept
the generally recognised principles of international law, this is generally not enforceable before Irish Courts.
Ireland has become party to a large number of international treaties including importantly the European
Convention on Human Rights and Fundamental Freedoms 1950 (ECHR). This permits any person
residing in any of the ratifying States (including Ireland) to appeal directly to the European Court of Human
Rights at Strasbourg, after exhausting the national remedies. This procedure has been availed of on quite
a number of occasions.
[4 marks]
Page 4
2.
Discuss the distinction between legal and equitable interests in the law of real property, emphasising its
importance with regard to unregistered land.
[Total: 20 marks]
General Comments
The aim of this question is to examine the students’ knowledge of the different forms of ownership of real
property as well as the importance of unregistered land. Students are expected to know the differences
between the two forms of interests and the effect that they have. The students are expected to give a
descriptive answer. The question is relatively straightforward and in-depth analysis is not required. Extra
marks will be given for students who incorporate statutes or case law into their answers.
SOLUTION 2
The main difference between the two types of interests is in their enforcement. Legal interests grant the
owner more rights over property than equitable rights. This distinction, which is the most important in the
law of real property, has developed alongside the court system. When the separate Court of Chancery was
in operation it was more concerned with equitable interests and promoted this form of ownership while the
common law courts emphasised legal interests and promoted them. The common law courts would
recognise legal rights exclusively while equitable interests were only recognised by the Courts of Chancery.
While these courts were amalgamated in the 19th Century the variations and disparity in the law have
remained. Unregistered land is real property that has not as yet been recorded in the land registry and
proof of ownership is only proved by the production of deeds. This can lead to uncertainty particularly when
there are competing legal and equitable interests. The main distinctions between the two types of interest
lie in distinguishing between the two forms of property rights and their enforceability. It is important for an
owner of property to know which form they have as they will then know what is enforceable against others
if they know what is considered legal rights and those that are considered to be equitable rights. Though
the Court system is amalgamated these distinctions are still relevant today particularly in the area of
unregistered land where the effect of legal or equitable interests may have an effect on the rights of third
parties who purchase the land for value.
[6 marks]
Legal estate or interests which have been established successfully have the strongest claim on property
and have the strongest right of enforcement. A legal interest is enforceable against any and all persons
who later acquire rights in the land; this is irrespective of whether those subsequent rights were acquired
or granted in return for valuable consideration and irrespective of whether the person who acquired them
had any knowledge of the existence of the prior legal estate or interest.
In contrast equitable ownership initially only confers rights in personam or in person, which compels
trustees to personally perform the trust. Equity also has developed the notion of the bona fide purchaser
for value as well as the doctrine of notice. This will grant some rights to subsequent purchasers of land give
consideration for the property. However in contrast to the holder of the legal interest the equitable owner
never holds an absolutely indefeasible title, therefore the equitable owner’s claim to the title is never as
strong as the legal owner.
[6 marks]
The notion of absolute ownership and trusts further illustrates the difference between the two in the area
of unregistered land. Historically trusts in land were unenforceable at common law as equity did not
recognise any rights accruing from trusts. The position in equity was different as the Chancellor would
enforce trusts and therefore recognise the rights of beneficiaries under the trust. The result of this was that
trustee of the land was the legal owner holding the land on behalf of the beneficiary and the beneficiary
was the equitable owner. The position is now that the legal ownership confers rights in the property itself
which can be enforced against anyone. The next important point is the priority between the various forms
of interest. Generally, the common law position is that when there are two competing legal interests – the
interest that was created first is the one that prevails. When land or an interest in land is transferred to a
third party, legal rights that previously attached to the land remain attached to it and are as a result binding
on the third party. The purchaser therefore has notice that ownership of the property is subject to any other
legal rights established by others; this leads to clarity in the law and certainty for the holder of the legal
interest. There are important differences between legal and equitable interests in land, which the fact that
there is unregistered and registered land in Ireland further complicates.
[8 marks]
Page 5
3.
What is the law on guarantees and after-sale services in Ireland under the Sale of Goods and Supply of
Services Acts?
[20 marks]
General Comments
In this question the students should be able to give a detailed description of the Sale of Goods and Supply
of Services Acts in Ireland and their application to the law of guarantees and after-sale services. This will
include a detailed description of both and how they have been regulated by the legislation. The question
is asked in a straightforward manner, which should not lead to confusion. Extra marks will be given to
students who include information on any relevant cases or statutes.
SOLUTION 3
Guarantee
Under the Sale of Goods and Supply of Services Act 1980 anything that is purchased from a retailer must
have three things: it must be of merchantable quality, it must be fit for its normal purpose, and reasonably
durable, and it must be as described, whether the description is part of the advertising or wrapping, on a
label, or something said by the salesperson. The importance of guarantees and after sale service was
acknowledged in the 1980 Act. The 1980 Act deals with guarantees in sections 15 to 19, and after-sale
services in section 12.
Section 15 of the Sale of Goods and Supply of Services Act 1980, defines “guarantee” as meaning, ‘any
document, notice or other written statement”, supplied by the manufacturer or other supplier, but not the
retailer, in connection with the supply of goods and indicating that the manufacturer or supplier will service,
repair or deal with the goods following purchase.’ This is a detailed description of what a guarantee means
and is important in regard to the rest of the legislation. It describes the relationship between the purchaser,
the retailer and the manufacturer.
Section 16 of the Act outlines the basic principles that must be contained in a guarantee. These include
among others that it must be clearly legible; it must state the name and address of the
manufacturer/supplier; it must state clearly the duration of the guarantee; it must clearly state what the
procedure is for presenting a claim, and this procedure shall not be more difficult than ordinary commercial
procedures; and it must clearly state clearly what the manufacturer/supplier undertakes to do and what
charges, if any apply to any enforcement of the guarantee. Under S16 (9) of the Sale of Goods and Supply
of Services Act, the failure to comply with the section is a criminal offence though this does not affect the
existence of the guarantee itself. This shows the importance of a guarantee that there are criminal
repercussions for the failure to comply with it.
[10 marks]
After Sales Service
Section 12 of the Sale of Goods and Supply of Services Act provides that there is an implied warranty that
spare parts and an adequate after-sale service will be made available in such circumstances as are stated
in an offer, description or advertisement by the seller, on a manufacturer's behalf or on his own behalf, for
such stated period or, if no period is stated, for a reasonable period. Any terms contained in the contract
of sale that would limit this provision would be void under section 12(3). This puts the onus on seller or the
manufacturer to grant certain provisions to customers relating to their customers. The fact that this is an
implied warranty is important as it then includes all contracts coming within the Act.
Both the seller and the manufacturer supplier may be liable under the guarantee to the buyer. Therefore
one cannot hide behind the other should there be any issues or problems. Under Sections 17 and 19 the
liability under this section is contractual, and thus all the law of contract also applies. A court may order a
seller or manufacturer or supplier to take such action as is necessary to observe the terms of the guarantee
or indeed to pay damages. Under Section 17 (1) of Sale of Goods and Supply of Services Act a seller may
avoid liability by expressly excluding himself at the time of delivery of the goods. Where a seller gives his
own written undertaking that he will service, repair or deal with the goods after purchase, it is presumed,
that he is not liable under any guarantee supplied. Importantly, “buyer” includes all persons who acquire
title within the duration of the guarantee. The rights under any guarantee are stated to be additional to a
buyer's rights at common law and under statute and these rights cannot be excluded or limited by the
guarantee.
[10 marks]
Page 6
4.
Describe in detail all the following negotiable instruments:
a)
b)
c)
Cheques
Bills of Exchange
Bank Drafts
[20 marks]
General Comments
The aim of this question is to examine the students’ knowledge of negotiable instruments and the
differences between them. Students are expected to understand the legal effects of these differences. The
question is relatively uncomplicated but it is important that the students can pick out the individual
differences between the negotiable instruments available in Irish law, though in depth analysis is not
required. Extra marks will be given for students who incorporate statutes or case law into their answers.
Solution 4
a)
b)
c)
Cheques
The Bills of Exchange Act 1882 is still the foundation on the law of surrounding the use of cheques and
other negotiable instruments. The Cheques Act 1959 is also relevant in relation to banks and their liabilities
in relation to cheques. Under the Act a cheque is defined in section 73 of the Act as ‘a bill of exchange
drawn on a banker payable on demand.’ Generally cheques are not used as negotiable instruments that
often, but are instead used as a direct method of payment and lodged to the payee's account. A bank may
become what is known as a holder in due course if the bank has taken a cheque in good faith and for value
and without notice of any defects in the title of the person who negotiated the cheque originally and may
have better title than the original cheque holder. Under the Cheques Act 1959 the balance of liability
generally is in favour of the bank. The use of cheques as negotiable instruments does open up the
possibility of fraud. The Bills of Exchange Act under Section 76 provides for the crossing of cheques to
increase the security of the cheque as a method of payment. Cheques can be crossed by simply drawing
two parallel lines. The phrase “not negotiable” on the face of the cheque which is accompanied by the
general crossing provides for further security. Another form of crossing, which of account payee crossing
is covered in the Cheques Act 1992, under Section 81(a) (1). This section states that an account payee
crossing has the effect of rendering the cheque non-transferable and valid only as between the parties.
[8 marks]
Bills of Exchange
A bill of exchange is defined in s. 3(1) of the Bills of Exchange Act 1882 as:
‘an unconditional order in writing, addressed by one person to another, signed by the person giving it,
requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a
sum certain in money to or to the order of a specified person, or to bearer’. Originally the most important
aspect of the bill of exchange was its negotiability. A bill of exchange can be transferred once it has been
endorsed without the need for formal assignment or transfer and the holder of the bill of exchange is
entitled to bring an action before the courts on the basis of the instrument. This is an exception to the law
of privity of contract. Once the new holder of the bill of exchange has taken the bill in good faith and for
value or some worth and without notice of any defects in the title or ownership of the person who negotiated
the bill then they become known as a holder in due course and may have better title than the original
holder. In ordinary usage cheques have generally taken the place of bills of exchange; however their use
is still important as cheques are generally not intended to be negotiated though some are.
[6 marks]
Bank Drafts
A bank draft is an order to pay money drawn by one branch of a bank on another. They are not cheques
since there is no distinct drawer and drawee as defined under S.3 of the Bills of Exchange Act, 1882. The
holder of a draft may, however by virtue of S.5 (2) of the Act treat the draft as either a promissory note or
as bill of exchange and use them in the same manner as they would one of those documents.
Drafts fall within the various protections afforded to banks under the Cheques Act 1959 in order that Banks
avoid being the victims of fraud. Bank drafts have some advantages over cheques. A bank draft is in some
circumstances more creditworthy than a cheque as the bank is regarded by the payee as a more
substantial and reliable creditor than the drawer of a cheque. In both commercial and private transactions
where there are substantial debts bank drafts have become the most common method of discharging those
debts.
[6 marks]
Page 7
5.
Discuss company law in regard to the:
•
•
•
Registration of a company;
Articles of Association;
Memorandum of Association.
[Total: 20 marks]
General Comments
The aim of this question is to examine the students’ knowledge of the basic documents of a company as
well as the creation of a company under Irish law. Students are expected to understand the legal effects
of these documents. The question is relatively uncomplicated but it is important that the students can pick
out the individual differences between the two core documents of a company, though in depth analysis is
not required. Extra marks will be given for students who incorporate statutes into their answers.
Solution 5
Registration of a Company
A company is registered under Section 18(2) of the 1963 Companies Act, which provides that from the date
of incorporation mentioned in the certificate of incorporation, the subscribers of the memorandum together
with such other persons as may from time to time become members of the company, shall be a separate
body. They will then be capable of exercising all the functions of an incorporated company. This introduces
the main benefit of corporate registration and limited liability which is separate legal personality. This
creates an entirely new legal person and limits the liabilities of both the company directors and the
shareholders. Limited liability, when it was first introduced, was absolute, however now company directors
do have some liabilities once the company is registered. This is to balance the risk of creditors doing
business with limited companies and to also protect shareholders. The effect of registration is detailed in
Section 18(2) of the 1963 Act, which provides that from the date of incorporation mentioned in the
certificate of incorporation, the subscribers of the memorandum, together with such other persons as may
from time to time become members of the company, shall be a body corporate with the name contained in
the memorandum. They will then be capable from there on of exercising all the functions of an incorporated
company until the company is would up. The company will have a common seal, but there will be liability
on the part of the members to contribute to the assets of the company in the case of winding up.
[8 marks]
The two most important documents in the formation of company under Irish law are the memorandum of
association and the articles of association. These together are considered to be the company’s
constitution. The provisions of the Companies Acts, together with provisions of EU law form the basis of
Irish Company law. The memorandum of association together with the articles of association seek to
balance several conflicting interests, that of the company directors, the shareholders, the creditors as well
as the interests of the state.
The Articles of Association
The Articles of Association constitute a contract between every shareholder and all the others, and
between the company itself and all the shareholders under Section 25 of the Companies Act 1963. Articles
of association typically cover the issuing of shares, the different voting and dividend rights attached to
different classes of share, restrictions on the transfer of shares, the rules of board meetings and
shareholder meetings, and other similar issues. They are basically the internal rules for the running of the
company. The provisions of the Companies Act, 1963, in particular section 25, give a statutory status to
articles of association. Section 25 states that when the Articles are registered they bind the company and
the members thereof to the same extent as if they respectively had been signed and sealed by each
member, and contained covenants by each member to observe all the provisions of the articles.
[6 marks]
The Memorandum of Association
The memorandum of association usually outlines matters such as the name of the company; it must also
include a declaration as to liability. The Memorandum also contains the Objects Clause. This clause will
define the purpose for which the company was formed and what it shall in fact do in the way of its business.
The objects clause will limit the powers and prevent the company from carrying out business outside its
remit. A memorandum also usually contains a Capital Clause. This will state the nominal capital of the
company that is the value in money of the shares which the company is authorised to issue and the number
of shares into which it is divided together with the amount of each share. The memorandum also contains
Page 8
the Association Clause. In this clause the original members declare that they wish to be formed into a
company and agree to take shares.
[6 marks]
6.
Stella decides she needs an entire new set of contract law books. She goes to Blanche’s bookshop where
she has noticed a number of good contract books in the shop window all priced €20 and one in particular,
“All about Contract” which she really wants to get. Stella goes into the shop and looks for the books inside.
When she finds them she realises that they are all marked €40. “All about Contract” is not there at all.
Stella goes to Blanche at the till with one of the books from inside the shop and Blanche asks for €40.
Stella says she will only pay €20 as that is what they are marked as outside. She also asks if she can have
“All about Contract” from the shop window. Blanche tells her that she is saving that for a law lecturer and
she cannot have it.
Advise Stella.
[Total: 20 marks]
General Comments
In this question the students should be able to give a detailed description of the law of offer and
acceptance. This will include a detailed description how it operates in reality and its application to the
problem question. The question is clear manner and students should be able to give a sufficient description
of the relevant law in the area. Extra marks will be given to students who include information on any
relevant cases or statutes.
Solution 6
This is a question that deals with the law of contract, particularly the law regarding to invitation to treat,
offer and acceptance. An Invitation to Treat is therefore a statement that is not intended to bind the party
making it in any contract. An invitation is the initial contact between the parties to the Contract. It is not a
manifestation of an intention to be bound, this is an offer. This is distinguishable from an Offer which is a
statement to the effect that the person making it is willing to contract on the terms stated, as soon as these
are accepted by the person to whom the statement is addressed.
In the case of advertisements such as the one in the window it is possible that it maybe an offer or an
invitation to treat. An offer may be made to one person a group or to the world at large, expressly or by
conduct though it presupposes at least two people, therefore an advertisement such as the one Blanche’s
window maybe an offer. This was the case in Carlill v Carbolic Smokeball Co. , where the Court decided
that in situations where the advertisement is not simply a mere puff but is seriously meant than it will be
considered to be an offer. In contrast to this the Court usually finds that advertisements are in fact mere
invitations to treat as in Tansey v The College of Occupational Therapists Ltd.. If the window display was
an invitation to treat, then Stella made an offer to Blanche when she went to the till to pay and it was open
therefore to Blanche whether to accept the offer or not. If the window display was an offer, than Stella was
entitled to accept it, as the Court would consider it to be an offer seriously meant.
Another important point is the books displayed inside the shop and whether these should be considered to
be an invitation to treat or an offer. The Court has stated on several occasions, particularly in The Ministry
for Industry and Commerce v Pim Bros Ltd that a display of goods is a mere statement of price and nothing
more. This would suggest that when a person goes into a shop where books are displayed and looks at
them that there is no contract until the person goes to the shopkeeper and states that they want to
purchase it and the shopkeeper says yes or no. The court outlined this scenario in Pharmaceutical Society
v Boots Cash Chemists. In applying this to the facts before us in the problem question: the book display
inside the shop was a mere statement of price and therefore there was no offer until Stella went to the
counter and offered to purchase the contract law books from Blanche. Blanche was then free to accept the
offer. It also means that Blanche is entitled to hold back the book that she has promised to the lecturer.
If the Court found that either the advertisement in the window or the display of goods were seriously meant
and therefore offers it would be open to Stella to accept them. Acceptance occurs when there is an
unequivocal acceptance of the terms of the offer. Acceptance is generally divided between two headings;
the first is the fact of acceptance and the second is the communication of acceptance. The fact of
acceptance may be inferred the conduct of the parties as the Court outlined in Billings v Arnott . As regards
to communication, the fact of acceptance must be stated to the offeror, though this may be waived if it is
an offer to the world, such as in an advertisement.
Page 9
In the situation before us it would seem that unless the advertisement or the display were offers and Stella
was able to accept the offer, it was up to Blanche to accept Stella’s offer when she came to the till. From
the facts of the case, Blanche in asking for £40 was making an offer to Stella, which Stella rejected and
made a counter-offer of £20, which Blanche rejected. If the offeree changes the terms even slightly, this is
a counter-offer, which destroys the original offer. There is therefore no contract between the parties
according to the facts as presented.
7.
What is the nature in Irish insurance law of
a)
b)
(a)
insurable interest and; an
insurance intermediary
[Total: 20 marks]
General Comments
The aim of this question is to examine the students’ knowledge and understanding of the law of insurance
in Ireland. The student’s knowledge of the areas of insurable interests and insurance intermediaries is the
particular area that their knowledge must be proved. Extra marks will be given for students who incorporate
statutes or case law into their answers.
Insurable interest
Insurance in Irish law was defined by Blayney J in International Commercial Bank plc v Insurance
Corporation of Ireland plc and Meadows Indemnity, as ‘a matter of speculation where the person desiring
to be insured has means of knowledge as to the risk, and the insurer has not the means or not the same
means. The insured generally puts the risk before the insurer as a business transaction, and the insurer of
the risk stated fixes a proper price to remunerate him for the risk to be undertaken and the insurer engages
to pay the loss incurred by the insured in the event of the certain specified contingencies occurring.’ The
law in Ireland is generally covered under the Insurance Acts 1909–2007.
One of the most important aspects of this definition is that the insured must have means of knowledge as
to the risk and the insurer has not the means or not the same means of knowledge. Following from this the
insured must have what is known as an insurable interest in the subject matter of the insurance policy. An
insurable interest arises when a person or thing is exposed to a risk which is the subject matter of the
insurance and the insurer must bare some relationship to the to the insured person or thing where he or
she stands to benefit from its safety or prejudiced by its loss. This means that the insured must have two
elements in order to have an insurable interest. That is they must have some economic interest and a
relationship of proximity to the risk. This was established in the Matter of the Arbitration Act, 1954, Church
& General Insurance Co. v Connolly & McLoughlin. [Unreported, High Court, May, 1981] where Costello J.
dismissed the plaintiff’s appeal against the decision of an arbitrator who found that the defendants had an
insurable interest in a property in which they were tenants at will. The High Court found that the defendants
should be indemnified not only in respect of the damage sustained to the property in which they were
tenants but also in respect of loss and damage caused to the interests of the owners. An insurable interest
applies to all forms of insurance contracts and is linked to indemnity policies. In the absence of an
indemnity policy it is covered by statute.
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(b)
Insurance intermediary
The Insurance Act 1989 created three categories of insurance intermediary. The first is a tied insurance
agent that is someone having an exclusive relationship with one insurer, and, consequently, only permitted
to offer the products of that company. The second is an insurance agent that is someone has a relationship
to sell the products of between one and four insurers; and the third is an insurance broker. That is someone
holding an appointment from at least five insurers, though generally brokers have many more than five.
Before becoming an insurance intermediary, permission must be granted by the Financial Services
Authority under the Investment Intermediaries Act, 1995. Not everybody who sells insurance is necessarily
an insurance intermediary. This includes insurance companies, employees of insurance companies,
intermediaries for whom the insurance companies take full responsibility as well as solicitors and certain
other professionals. All those who have been granted permission by the Financial Services Authority will
be listed in their register under Section 31(4) of the Investment Intermediaries Act, 1995. There are three
kinds of intermediaries the regulation of which varies between them. These are Restricted Activity
Investment Product Intermediary, an Authorised Advisor and an Authorised Cash Handler.
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